Focus Group Economics

Dean Baker Feb. 12, 2002

After one of his players muffed an easy play, the legendary manager Casey Stengal yelled out, "doesn't anyone on this team know how to play the game of baseball?" This was during the 1962 season when the New York Mets were on their way to set a single season record for losses. The way things are going, the Democrats in Congress are making the '62 Mets look good. Their basic problem is simple, they remain trapped in a lock box.

In case you forgot, the lock box was where the Social Security surplus was supposed be kept. In the 2000 presidential campaign Al Gore repeatedly promised us that he would never let anyone touch the lock box—none of the Social Security surplus would not be spent in a Gore Administration. The vast majority of the Democrats in Congress sang from the same songbook in their election campaigns.

Some of us tried to warn the Democrats that this was not good economic policy, nor a clever political strategy. We tried to tell them that there was no reason to save the entire Social Security surplus. We argued that it would be better to spend some of this money on a serious prescription drug benefit for seniors, Head Start, extending health care coverage and reforming the health system.

Furthermore, some of us pointed out that it would not be possible to save the entire surplus, even if the Democrats tried. A recession was inevitable, if not in 2001, then in 2002 or 2003. We also said that the projections for budget surpluses were way too large. They assumed growth rates that were overly optimistic. They also assumed that the government would collect more than $1.1 trillion in capital gains taxes, even though the stock market was virtually certain to plunge from unsustainable levels.

We also pointed out that the Democratic strategy was fundamentally dishonest. The Social Security trust fund holds government bonds. It holds the exact same number of bonds regardless of whether the surplus is saved or spent, so the implication that the Republicans would jeopardize Social Security if they spent the surplus was not true.

No one in the Democratic leadership wanted to hear these arguments. Their focus groups told them that the "saving the Social Security surplus" was good politics. That was all they needed to know.

Now we are one year into a Bush Administration and the surpluses are gone. The projections show that the whole surplus will be spent in the next two years. And in subsequent years the vast majority of the surplus will be spent in any plausible scenario.

Many are taking this as an opportunity to blame the Bush tax cuts. Certainly the tax cuts explain much of the shift from surpluses to deficits. But many congressional Democrats are too timid to call for repealing the tax cut, or at least the portion going to the wealthiest families. Since most of the tax cut went to the richest 2 percent, rolling back this portion of the tax cut would get back most of the lost revenue.

But, even if they did take back the portion of the tax cut going to Bill Gates and his friends, the Democrats still would not be able to save the Social Security surplus. The numbers just won't add up, regardless of what the focus groups say. The new projections show that we will be spending large parts of the Social Security surplus for the foreseeable future under any reasonable scenario.

A real opposition party would put the nation's choices starkly. The nation can cut taxes for the very wealthy or it can ensure that senior citizens are able to afford prescription drugs. It can cut taxes for the wealthy or it can improve the nation's education system. It can cut taxes for the wealthy or it can extend health insurance to the 45 million uninsured. This platform would give voters a real choice in the elections this fall.

But, the Democratic leadership thinks the best strategy is blaming the Republicans for spending the Social Security surplus—even though everyone recognizes that the surplus will be spent in any case. They want to scare people about "raiding" the Social Security surplus—even though the deficits have no effect on Social Security.

So the Democrats no plan to go into the 2002 election with an economic agenda that is untrue, incoherent, and doesn't really offer anything to anyone. Imagine what Casey Stengal would say about this team.

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.